Hyperinflation may cause the collapse of the market system.
Answer the following statement true (T) or false (F)
True
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For a country to successfully maintain a fixed exchange rate value of its currency relative to another currency (for example, as is done when currencies are unified or pegged), it must
a. maintain a relatively high rate of inflation. b. balance the government budget each year. c. give up the independence of its monetary policy. d. run a trade deficit.
Choose the letter of the diagram in Figure 3.1 that best describes the type of shift that would occur in each situation for the market listed on the left, ceteris paribus. Figure 3.1 Shifts of Supply and Demand Candy bars: People become more health-conscious and prefer vegetables instead of candy bars.
A. A. B. B. C. C. D. D.
Fill in the blanks. For a normal good, the income effect is _________, and the substitution effect is _______.
a. positive; positive b. positive; negative c. negative; positive d. negative; negative
Two goods are substitutes when
A. an increase in the price of one reduces the demand for the other. B. the two goods have the same price. C. an increase in the price of one raises the demand for the other. D. the two goods are used together.